19th International Conference on Production Research
A FRAMEWORK TO ANALYZE THE ORGANIZATION OF THE LOGISTICS
SERVICES
N. Bellantuono1, I. Giannoccaro, P. Pontrandolfo
Politecnico di Bari, Italy
Abstract
This paper concerns the sourcing strategy of the logistics services and the organization of the buyersupplier relationships. It aims at identifying the sourcing strategy for the different types of logistics services
and to design the proper way to organize the buyer-supplier relationships. Previous literature usually
addresses this topic, by adapting the general portfolio models to the logistics services with no regard for
their specific nature. In addition, it seems that such models are not adequate to identify appropriate
sourcing strategies as well as to suggest how to manage the attendant relationships.
Therefore, on the one hand the paper defines an original portfolio model specific for the logistics services
and then classify them into the resulting portfolio matrix. On the other hand, five different forms of
governance of the logistics services ranging from market to hierarchy are identified, by means of three
dimensions, i.e. physical, strategic and organizational. The forms of governance suitable to the different
types of the logistics services are suggested. In particular, specific emphasis is given to intermediate forms
of governance such as the organized market based on the fourth party logistics provider. This form of
governance seems more appropriate for the case of the consolidated logistics services.
Keywords: Logistics services, forms of governance, portfolio models, organized markets, fourth party
logistics.
1 INTRODUCTION
Changes in the competitive scenario and the increased
use of the outsourcing have caused a great interest for the
design and the management of the supply relationships of
the logistics services [1].
Different models of buyer-supplier relationships for the
logistics services exist. A firm needing a logistics service
adopts an arm’s length approach with her logistics service
provider (LSP) if she purchases the service on the market
every time it is needed. This model is characterized by
spot transactions, short-term arrangements, limited
information sharing, and focus on efficiency. It does not
lead to long-term strategic advantage [2].
At the opposite side, a firm and her LSP establish a
partnership approach when they become long-term
strategic partners, namely have mutual trust and share
risks and rewards, exchange operating as well as financial
information, and make joint investments in facilities [3]. [4]
underline three dimensions of the involvement required to
firms so as to establish a partnership: (i) the coordination
of operational activities, such as production planning and
deliveries; (ii) the adaptation of resources to the
requirements of the partner, for instance by joint product
development and dedicated processes; (iii) a close
interaction among individuals, so as to increase
commitment and mutual trust. Since the aforementioned
dimensions are costly to be assured and expose actors to
a wide range of vulnerability [5], not all buyer-supplier
relationships should be managed by using partnership.
However, a properly chosen partnership assures an
increase of the effectiveness – in terms of level of service,
flexibility, and agility – as well as the efficiency – in terms
of cost reduction – for both actors [6].
Recently, two new models that are coherent with a
partnership approach are emerged, namely the network
with third-party logistics (3PL) and the network based on a
fourth-party logistics (4PL). They differ in the degree of
actors’ involvement and in the wideness of the
1
relationship. The 3PL provider is a LSP that cooperates
with a firm in a specific logistics field, understanding her
needs, developing a solution, and providing the service.
The 4PL provider, in turn, is an integrator that designs,
builds and runs comprehensive logistics solutions, by
using capabilities and resources from himself and other
organizations, including both buying firms and other LSPs.
This paper intends to analyze the problem of choosing and
designing the proper buyer-supplier relationships for the
logistics services. While this topic has been more deeply
investigated as to the physical items, it is largely neglected
referring to the services.
A classification of the logistics services is provided by
using a portfolio approach [7]. This permits not only to
classify the logistics services, but also to identify the
sourcing strategies. The proposed portfolio matrix is based
on two dimensions, i.e. the strategic importance of the
logistics services and the complexity of the supply
markets.
However, the portfolio approach is not adequate to identify
the appropriate sourcing strategies of the logistics services
as well as to suggest how to manage the attendant buyersupplier relationships. In particular, as to the paper aim,
the main weaknesses of this approach concern: the focus
on the classification of the products/services rather than
on the organization and the management of the buyersupplier relationships; the absent consideration of the
interdependencies between products/services, and the
use of a dyadic (buyer-supplier) rather than a supply chain
(SC) point of view [8]. Such limitations are exacerbated in
the case of the logistics services, because of the recent
trend to buy more complex and consolidated logistics
services.
Thus, this paper intends to overcome these limitations. To
pursue this aim, a framework that classifies the different
models of the buyer-supplier relationships is provided by
focusing on the physical, the strategic, and the
organizational dimensions. In developing such a
Corresponding author. DIASS, Politecnico di Bari, viale del Turismo,8 – 74000 Taranto, Italy (tel.: +39 0805964218; fax: +39 0805964303;
e-mail address: n.bellantuono@poliba.it).
framework, the SC is assumed as unit of analysis. In
particular, the considered SC is made up of the buyers of
a product, their suppliers, both expressing logistics service
demand, and the LSPs. Such a framework specifies the
way to organize and manage the SC relationships. In This
way, the SC as a whole is considered and the
interdependencies are taken into account.
The proposed framework identifies five different forms of
governances of the specified SC, ranging from market to
hierarchy. A key contribution of the framework concerns
the definition of a new form of governance that has been
conceptualized and applied in SCs of tangibles but never
considered in the case of logistics services, namely the
organized market [9].
Finally, for each class of the logistics services the specific
form of governance that should be adopted is suggested.
While the market seems to be appropriate for the not
critical and leverage logistics services (e.g. loading,
unloading, picking, and material handling), the network
with 3PL and the organized market are suitable for the
strategic services. In particular, the main benefits of the
organized market are achieved in the case of complex and
consolidated logistics services. The organized market
requires the buyer of the logistics service to adopt a
partnership approach with only one LSP (named 4LP
provider), who is responsible for the appropriate
management of the relations with the LSPs of each
service.
2
A
PORTFOLIO
APPROACH
TO
CLASSIFY
LOGISTICS SERVICES
The concept of portfolio analysis was developed at first in
finance, aimed at selecting the equity investments
assuring the maximization of the investor’s expected
payoff at a given level of risk or, correspondingly, the
minimization of his risk assuming a given payoff [10].
However, such a concept was proven to have a promising
applicability in each field when the allocation of scarce
resources is required to maximize a payoff/risk ratio. In
particular, portfolio models have been successfully used in
two fields namely marketing – e.g. with the BCG matrix
[11] and the General Electric matrix [12] – and purchasing,
where the portfolio concept is applied at different
managerial levels, from the strategic planning to the
operational decision making [13].
In the last field, [7] borrows this concept to propose a
easy-to-implement model classifying the items to be
purchased based two dimensions: (i) the importance of the
item, and (ii) the complexity of the supply market. The first
dimension concerns the percentage of total purchasing
cost, the value that it adds to the product, and the impact
on the profitability. The second one deals with the scarcity
of suppliers, the entry barriers in the supply market, and
other monopolistic conditions, as well as if the buyer can
easily replace the product with alternative items.
Four categories of items are considered by assuming two
values for the two dimensions (i.e. high and low). Each
category corresponds to a suitable supply strategy to be
pursued, as described next:

non critical items, having low importance and low
market complexity, should be purchased by exploiting
standardization so as to reduce costs and achieve
functional efficiency;

leverage items, having high
market complexity, should be
multiple suppliers on the basis
paying attention to the effect
orders;

bottleneck items, with low importance but high market
complexity, should be reduced by looking for
importance but low
typically sourced by
of cost/price drivers,
of high volumes of
substitutes and, if it is not possible, they are to be
purchased from carefully selected suppliers assuring
the volume and the delivery time desired by the
buying firm;

strategic items, whose importance and market
complexity are both high, have an extensive impact in
buyer’s profitability. Therefore they should be
managed by enabling long-term collaboration with
suppliers so as to assure both availability and fit to
specific needs.
Several portfolio models extending the Kraljic’s seminal
one has been proposed in the literature. [14] classify items
on the basis of the level of control (i) on the internal market
demand and (ii) on the external supply market, and define
the supply situations as plain, internally problematic,
externally problematic or complicated. The action plans
suitable to each situation are then identified, whose focus
is on the purchasing effort, the demand, the supply, and
the integration.
[15] consider the strategic importance of the purchase and
the difficulty of managing the purchasing situation as key
dimensions to define the appropriate sourcing strategy,
and provide a list of factors influencing both dimensions.
Furthermore, they affirm that a methodology to weight the
factors is necessary [16], and that each dimension can
assume a continuum of values rather than only two ones.
According to [17], the Kraljic’s dimensions do not explicitly
take into account the relative bargaining power between
the buyer and its suppliers. Thus, they include the mutual
dependence as key dimension. Similarly, [3] focus on
buyer’s and supplier’s specific investments. The attendant
scenarios are: market exchange, if both actors do not have
to make high investments to exchange the item, strategic
partnership in the opposite case, and buyer/supplier
captivity, if buyer/supplier’s investments are considerably
higher that the ones of the counterpart.
The models above present some analogies. All of them
include an “internal” dimension, that depends on the use of
the item by the buyer (i.e. the item’s importance, the
amount of buyer’s specific investments, and other similar
variables). The second dimension is related to an
“external” variable (e.g. the nature of the supply market,
the supplier’s specific investments, and so on). A further
analogy refers to a managerial implication: in all models
items characterized by high values in both the variables
are considered as strategic. Therefore, the sourcing
strategy of the strategic items require to be based on
partnership relationships, which are characterized by longterm horizon, mutual trust, and high jointly efforts [4].
2.1 Portfolio matrix of the logistics services
A lack in the literature on the portfolio models is that they
do not explicitly refer to the services. Moreover, they can
not be directly extended to the services because of their
different nature: services cannot be stored like physical
goods. Thus, specific portfolio model should be developed
to address the purchasing of the services.
This paper focuses the attention on the logistics services.
To our knowledge, only [1] propose a portfolio model of the
logistics services classifying them into two categories (i.e.
basic and advanced) based on the degree of complexity.
The latter is turn depends on several factors, such as: the
predominance of managerial or operative activities, the
effort required for their customization and re-engineering
according to the customer’s needs, and the bundling of
sub-services.
We propose a portfolio matrix for the logistics services
based on two dimensions. The first dimension refers to an
internal property of the buyer, namely the strategic
importance of the service. It encompasses both economic
High
of the service
Strategic importance
19th International Conference on Production Research
Low
Leverage
Strategic
Traditional inventory management
Distribution management
Warehousing
Tracking
Material handling
Tracing
Picking
Reverse logistics
Non-critical
Bottleneck
Loading and unloading
Routing
Packaging
SC inventory management
Labelling
Transportation management
Administrative management services
Low
High
Complexity of supply market
Figure 1. Portfolio matrix of logistics services.
and strategic factors, such as: the weight of the service on
the total amount of buyer costs, the potential and actual
savings in the logistics, manufacturing and designing
costs, the value added included in the buyer’s products,
and the premium price that the buyer’s customers are
disposed to pay. The second dimension concerns the
complexity of the supply market, which takes in several
factors referring to the external environment, such as: the
novelty and the complexity of the service, the number of
potential suppliers and the saturation of their capacity, the
uncertainty of the purchasing, and the information
asymmetries. Both dimensions can be operationalized as
in [15-16; 18-19], which the reader is referred to.
Four classes of the logistics services are then defined,
namely non-critical, leverage, bottleneck, and strategic. As
to sourcing strategies, the non-critical services should be
provided focusing on standardization, so as to reduce the
transaction costs. The leverage services, whose impact on
buyer’s profits is higher, should be procured by exploiting
the economies of scale whenever is possible. The
bottleneck services should be procured so as to reduce
the supply risk, for instance by mechanisms to better
involve the provider and share risks with him. Finally, the
strategic services can be internalized or outsourced; in this
case, they require a partnership relationship with the
logistics provider.
Figure 1 depicts the classification of the main logistics
services into the proposed portfolio matrix. Note that such
a classification can appear the same for many industries.
Even though this seems to be more strictly true for the
complexity of the supply market, also for the strategic
importance of the service a similar consideration holds.
Thus, the classification of the purchasing of the logistics
services is less industry-dependent than the purchasing of
physical items.
New trends have emerged in the purchasing of the
logistics services: the increasing consolidation of logistic
services by the LSPs that tend to offer a wider, more
complex panel of services; the improvement of internetbased services; and the focus on the core competences
both for buying firms – which tend to increase their
recourse to outsourcing for the logistics services – and for
the logistics providers – which tend to become less assetbased and outsource to low-level logistics operators some
not value-added activities, like the material handling and
the transportation [1]. Such trends cannot be dealt with the
classical portfolio approach and calls for innovative
sourcing strategies for the logistics services.
2.2 Weaknesses of the portfolio models
The literature on the pitfalls of the portfolio approaches is
as wide as the one providing applications of such a
technique [20]. The major criticisms refer to their
effectiveness both in representing the complexity of
business decisions and in providing useful suggestions for
practitioners.
As to the former aspect, several scholars have pointed out
that, by representing the complexity of business decisions
by using two basic dimensions, whatever complex or
inclusive, two risks emerge. On the one hand, if too
simplified dimensions are considered, important variables
risk to be neglected [8]. On the other hand, if each
dimension is associated with a rich panel of factors, a high
managerial effort is required, which cuts down the benefits
of the technique [21-22]. Furthermore, some problems
arise even for the quantitative tools used to operationalize
the dimensions of the model, which are affected by the
arbitrary choices of the factors [23], the values assigned to
them, and their weights [12]. To avoid this problem, [15]
suggest the use of a contingency approach so as to
carefully weight the factors influencing both the two
dimensions of the model, namely the relative supplier
attractiveness and the strength of the relationship between
supplier and buyer. However, even in this case a
considerable amount of discretionality continues to exist.
In respect of the effectiveness of the portfolio approach in
suggesting the suitable sourcing strategies, [24] affirms
that the portfolio models do not provide the buyer with any
pro-active suggestion. In most cases, they give very
limited explanation of how to manage each category of
items in practice, and reduce their recommendations in
suggesting to exploit the contractual power, if it exists, or
to prevent risks due to higher supplier contractual strength.
Indeed, some empirical evidence show that company
implementing portfolio models as proposed in literature
tend to focus more on the classification of items than on
the development of effective action plans [23].
A further important limitation of the portfolio models
influencing their practical usefulness is that they analyze
dyadic contexts, namely the supplier-buyer couple, with no
matter of the other supplier’s customers or,
correspondingly, the other buyer’s suppliers [8]. So doing,
they neglect the interdependencies in the SC relations,
which however are important to be considered, because
the features of the product/service of a supplier are
affected by her relationships with each of his customers,
and in the same way the needs of the buyer also depends
on the features of the other items or services she
purchases by several suppliers.
Finally, the portfolio models omit any consideration about
the development of the product/service, and in particular
the relations existing between the engineering, the
purchasing, and the supplier types. To avoid this problem,
[23] propose a methodology to simultaneously link the
items classes, the suppliers types, and the involvement of
the actors in defining the items specifications. However,
such a methodology seems to be more appropriate for the
Table 1. Physical variables
Hierarchy
Internal market
Market
Network with 3PL
Organized market
Number of LSPs
Zero
Zero
Several for each
service
Several for each
service
One 4PL and one
or more LSPs for
each service
Number of tiers
-
-
One
One or two
Two or three
Asset intensity of
first-tier LSPs
-
-
Asset-based
Asset and non
asset-based
Non asset-based
purchasing of tangibles rather than for the logistics
services, whose classification is hard to be made.
In short, even if the aforementioned portfolio models offer
to practitioners some guidelines to manage and design
their sourcing strategy, it cannot be considered enough.
Thus, the proposed portfolio matrix of the logistics services
needs to be integrated so as to overcome the limitations
above and better support managers in the design of the
appropriate way to manage the sourcing relationships.
3
FORMS OF GOVERNANCE OF LOGISTICS
SERVICES
In this Section a framework of the forms of governance of
the logistics services is proposed, referring to three groups
of variables. Such a framework is intended to be a
guideline to the managers for the implementation of the
proper sourcing relationships of the logistics services.
The SC is considered as unit of analysis. It is made up of
the buyers of a product, their suppliers, both expressing
logistics service demand, and the LSPs.
Three dimensions characterizing the SC are considered in
the framework, namely the physical, the strategic, and the
organizational.
Table 1 concerns the physical issues. The first considered
variables is horizontal and vertical complexity of the SC
[25], namely its physical width and depth [26], which are
measured by the number of LSPs and of logistics tiers,
respectively. The former measures how many competing
firms can provide a given logistics service to the buyers.
Its value is zero if there is a vertically integrated firm that
internally cares of all logistics functions.
The number of tiers indicates if the buyer has a direct
interaction with all her logistics providers (number of tiers
equals to one) or there are some providers (named firsttier providers) that interact with the buying firms both for
the services that they can autonomously provide and for
the services that they cannot provide; in this case, they
recur to second-tier providers that act as sub-contractors
[27-28]. Consequently, first-tier providers can be asset or
non-asset based.
A comparison among the forms of governance as to
strategic dimensions is depicted in Table 2. At first, the
decision making process is evaluated as centralized or
decentralized. Note that in the organized market, the
decision maker about logistics is the 4PL provider, who
acts as an intermediary between the customer firm and
her logistics providers at an operational level.
Interdependence refers to the amount of correlation
between the success of the buyer and the policies adopted
by her first-tier logistics providers, and vice versa [29-30].
It is evaluated along a scale from low to high and is strictly
linked to the commitment in achieving the counterpart’s
goals [31].
The sourcing strategy refers only to the procurement of
logistics services: although the single sourcing is very
uncommon in the logistics field, it is typical of some
advanced forms of governance, when buying firms utilize a
predominant logistics provider for a large part of the
services, but sometimes they recur to one or more others
providers to manage the peaks of requirements (second
sourcing) [32-33]. The latter is also adopted to reduce the
risk of buyer captivity, i.e. the opportunistic behaviour of
the provider if she has a high bargaining power [3].
Parallel sourcing is chosen when the buyer purchases a
family of the logistics services by more than one provider,
each capable to extend his offer to similar services with
low switching costs [9]. Lastly, by adopting multiple
sourcing, the buying firm is assured to have very low
switching costs and a high control of performance, but she
renounces to any form of integration with its providers.
The definition of service specifications measures the
degree of mutual involvement of the logistics service
providers and their buyers in designing the service [23].
When the SC is composed by more than an actor, three
cases are possible: (i) specifications can be defined
exclusively by the buyer, (ii) exclusively by the logistics
provider, or (iii) jointly by the buyer and the provider. In the
last case, specifications can be mostly quantitative, mostly
qualitative or mixed [5]. It is observed that specifications
are mostly qualitative if the degree of tacit knowledge they
contain is high, namely when they concern organizations
having similar culture and attitudes, as it happens between
strategic partners.
Table 3 synthesizes how the forms of governance differ as
to the organizational aspects. Vertical integration, whose
value varies from high to low, is evaluated as the extent to
Table 2. Strategic variables
Hierarchy
Internal market
Market
Network with 3PL
Organized market
Decision making
process
Centralized
Decentralized
Decentralized
Decentralized
Centralized
Interdependence
-
-
Low
Medium
High
Commitment
-
-
Low
Medium-high
High
Sourcing strategy for
logistics services
-
-
Multiple sourcing
Single or parallel
sourcing
Single sourcing
toward 4PL; single,
multiple, or parallel
sourcing between
4PL and other
logistics providers
Definition of service
specifications
Internally defined
Internally defined
Exclusively defined
by the provider
Jointly defined
Jointly defined
19th International Conference on Production Research
Table 3. Organizational variables
Hierarchy
Internal market
Market
Network with 3PL
Organized market
Vertical integration
High
High
Low
Medium
Medium-high
Time horizon
-
-
Short term
Long term
Long term between
buyer and 4PL
provider; medium
or long term
between 4PL and
other logistics
providers
Bargaining power
-
-
Symmetric
Symmetric
Asymmetric
Level of
cooperation
-
-
Low
High
High
Information sharing
Medium-high
High
Low
Medium-high
High
Coordination
mechanisms
Bureaucratic rules
Internal price
Market price, short
term contracts
Long-term contracts
Long-term
contracts between
buyer and 4PL;
short or long-term
contracts between
4PL and other
logistics providers
Structural flexibility
Low
Medium-low
High
Medium
Medium-high
which the focal firm owns the stages of the chain [30].
More precisely, it is a measure of the strength of the
relationships between firms at different SC stages as well
as between who needs the logistics services and who
provides them. With respect to the time horizon of the
relationships with the service provider short and long term
relationships are distinguished.
The bargaining power refers to logistics decisions and it is
evaluated as asymmetric or symmetric depending on
whether or not there is an actor in a predominant position
[34]. A range from high to low is adopted to evaluate the
level of cooperation, which is a measurement of the
commitment of the actors providing the logistics services
in pursuing the buyer’s goals, and vice versa [30]. The
information sharing refers not only to specific information
needed to the provision of the logistics services, but
includes also what concerns the strategic objectives of the
firms involved in the relationship. If the amount of shared
information is high, indeed, the buyer can set her
requirements according to the counterpart’s objectives,
and correspondingly the logistics provider can define his
offer considering the buyer’s in-depth goals.
Coordination mechanisms are specific systems that are
utilized to actually implement the decisions which are
taken [26; 30]. They differ for both the level of formalization
and the number of aspects taken into account: in the case
of centralized decision making, the bureaucratic rules are
usually adequate to assure the implementation; otherwise,
firms should agree on an internal price, a market price (by
endorsing to simple, short-term contracts), or a more
complex set of clauses as defined in a long-term contract
[35-36].
Finally, the structural flexibility is evaluated along a
continuum ranging from low to high, with possible
intermediate values.
3.1 Hierarchy and internal market
In a hierarchy, there is a unique actor which makes all
decisions, including the ones concerning the definition and
the management of logistics services. In a hierarchy the
actors acknowledge the authority of the unique decision
maker. In practice, pure hierarchies are characterized not
only by vertical integration, but also by a bureaucratic
approach. The hierarchical archetype does not exclude
that participant with no decision making power could
generate and suggest alternatives to the central decision
maker; however, they cannot exert any veto power on the
decisions [37].
In practice, such a form of governance can be effectively
adopted only if the decision maker is legitimated to impose
his choices to the others actors. To avoid the risk that
actors deviate from the central decision maker decisions to
pursue their own interests, he can use a suitable systems
of rewards and punishments [38-39].
More recently, some deviations to the classical
hierarchical form of governance have been proposed. The
Internal markets [40] are a form of governance
characterized by a hybrid organizational system because
the transactions within a firm or among the units of a
corporation occur without a centralized top-down control,
but are the result of the coordination of the different actors
involved. Such form of governance is based on the
adoption of market mechanisms called internal prices,
which explicitly quantify in terms of money the value
connected to each internal exchange. A concept very
similar to internal markets is the quasi-market, as
proposed by [39].
The adoption of market mechanisms to rule transactions
within a hierarchy gives transparency to the behaviour of
the actors, whose actions can be explicitly evaluated in
term of the effect that they make on the organization as a
whole. Therefore, actions are assured be coherent with the
organization goals. The main advantages of the internal
market, in comparison with a pure hierarchy, are the
higher efficiency and the faster responsiveness to the
environmental changes.
In the field of logistics services, an internal market is
defined when the logistics division of a firm uses market
mechanisms to allocate logistics resources (e.g. freight
assets, inventories, etc.) within the organization.
Both hierarchy and internal market should be adopted
when the firms decide to internalize the logistics services.
As said above, this choice could be pursued for the
logistics services so strategic that the firm prefers to make
them.
3.2 Pure market
At the opposite of the hierarchy, the pure market consists
in a form of governance based on the independence
between actors, each of them covers no more than a
single stage along the chain and makes autonomously
decisions aimed at maximizing his own utility rather than
the system-wide one. Market transactions are usually spot,
and are ruled by an approach known as arm’s length. In
other terms, actors aim to maximize their immediate
payoffs with no matter of the effect that it causes on the
counterpart’s future behaviour. Therefore, this approach
does not care about the long-term benefits [2].
Consequently, this approach should be adopted only if the
service does not require any mutual involvement of the
actors and it can be provided by many logistics providers.
The adoption of the pure market seems appropriate only
for the logistics services characterized by a low level of the
market complexity, namely for the non-critical and the
leverage logistics services.
3.3 Networks with 3PL providers
At the present, supply relationships are heavily shifting
from the arm’s length approach to less greedy strategies,
which can assure higher long-term payoffs [6]. The need of
more complex strategies has been proven to be stronger
when the market complexity of items to be purchased is
too high to allow the use of inter-organizational forms of
governance based on pure market criteria.
Usually, scholars define such cooperative relations as
networks. The term refers to different kinds of cooperative
inter-organizational relationships [35], having some
features in common, such as: (i) a strategic goal shared by
the actors, who however maintain to some extent their
independence; (ii) the mutual adaptation of culture,
organization, goals, and behaviour; (iii) a coordination
mechanism that outstrips the strict price mechanism and
encompasses long-term aspects; (iv) the existence of legal
structures that include some flexibility to deal with the
unpredictable environmental contingencies.
In the field of logistics, the transition towards cooperative
inter-organizational relationships has been pointed out
since the Nineties by several researchers, who introduced
the concept of third party logistics (3PL). A 3PL is an
external firm performing a various panel of logistics
functions, otherwise carried out internally [41]. Other
scholars have used the terms logistics alliance to indicate
“close and long-term relationships between a customer
and a provider encompassing the delivery of a wide array
of logistics needs” [42]. In such a logistics alliance,
partners jointly work in understanding the customer’s
logistics needs, developing suitable solutions and
measuring performance so as to assure a win-win
arrangement [31].
Among the numerous benefits due to the adoption of 3PL
[43-44], it is highlighted that, compared with the pure
market, 3PL assures more timeliness and customer
orientation (e.g. by satisfying asset specifics logistics
needs), and prevents actors’ opportunistic behaviour;
compared with the hierarchy and internal market, 3PL
assures a better responsiveness to the environmental
changes and permits the focus on the buyer’s core
competencies, turning the fixed in variable costs and
reducing financial risks. Therefore, the adoption of 3PL
seems proper for the logistics services classified as
bottleneck and strategic.
Nevertheless, some pitfalls emerge in resorting to 3PL
providers [44], due to organizational rather than
technological aspects. In fact, although the improvements
in ICT tools and infrastructures make information sharing
easier than in the past, in most cases actors are still afraid
of vulnerability to the knowledge spill-over, thus
behavioural and cognitive conservatism emerge [45]. To
overcome such problems, two-way feedback systems
should be implemented, which formally measure the
partner’s performance, and frequent meetings and human
resource exchanges should be promoted.
However, such mechanisms cannot reduce the strategic
inadequacy of the 3PL at the strategic level. Such form of
governance proves effective at the operational level, but
fails to be effective at the SC strategic level: by adopting
logistics partnerships in bounded fields, firms cannot build
an holistic vision of their logistics requirements; thus, they
are unable to achieve all information needed to make an
effective SC reconfiguration [45].
3.4 Organized market
The concept of organized market was introduced by [9]
referring to an hybrid organizational system between
market and hierarchy aiming at reducing transaction costs
in comparison with pure markets, and internal coordination
costs in comparison with hierarchical organizations, by
means of a specific type of actors.
As regards the logistics field, an organized market of
logistics services consists in a coordinated system
composed by different actors: suppliers, supplier’s
suppliers, manufacturers, warehouses, distributors,
retailers, as well as logistics providers offering one or more
services, their subcontractor (including owners of trucks or
other means of transportation). What distinguishes the
organized market of the logistics services from other forms
of governance is the existence of the fourth party logistics
(4PL) provider, which plays a key role: it is the unique firsttier logistics provider and cares of both the strategic and
the operational activities [45]. As to the strategic level, it
offers its resources, skills and technologies to the
customers and designs, builds, and runs comprehensive
SC solutions, possibly including all logistics services. At
the operational level, it takes care of all customer’s
logistics needs, and acts as a mediator between her and
the second-tier LSPs by managing all logistics provisions.
Some benefits can be achieved by adopting the organized
market rather than the network with 3PL providers. Firstly,
the 4PL provider focuses on information management as
his core competence, so as to reduce the system’s
logistics ineffectiveness. This assures a holistic vision of
all logistics needs and fosters the customer’s SC
reconfiguration as a whole.
Secondly, the 4PL provider, even though it does not
possess physical assets, offers – via asset-based LSPs –
a complex logistics service, by consolidating a wide
spectrum of single services, belonging to different classes
of the portfolio matrix. In this case, the buying firm is
unable to define her purchasing strategy towards the 4PL
provider only on the basis of the classification of logistics
services as by the portfolio matrix. The 4PL provider, in
turn, recurs to the portfolio matrix to manage his
relationships with the second-tier LSPs.
Thus, the organized market is the best solution in the case
of consolidated logistics services made up of services that
belong to different classes of the portfolio matrix.
4 CONCLUSIONS
This paper has addressed a key topic in the literature, i.e.
the sourcing strategies of the logistics services and the
organization of the supply chain involving the logistics
services providers.
In particular, a portfolio model of the logistics services has
been proposed, having as key dimensions the strategic
importance of the service and the complexity of supply
market. It has been used to classify the logistics services
as well as to identify the sourcing strategies. The choice of
such an approach is due to its ease of understanding;
however, several pitfalls of portfolio approaches have been
highlighted: their inadequacy in suggesting managers as
they should manage the sourcing relationships; the absent
consideration of the interdependencies between
19th International Conference on Production Research
products/services; and the use of a dyadic rather than a
supply chain (SC) point of view.
To overcome these limitations, a taxonomy of the forms of
governance of the logistics services has been proposed by
using three main dimensions, i.e. physical, strategic and
organizational. Beside traditional forms of governance
(market and hierarchy), three intermediate forms have
been identified in the field of logistics services, namely the
internal market, the network with 3PL, and the organized
market of logistics services. The latter can be considered
as an evolution of networks with 3PL, where a LSP –
named 4PL provider – gathers all services and acts as
mediator between the buyer and the other LSPs. The 4PL
provider has a holistic vision of logistics needs of her
customer so as to favour a more knowledgeable SC
reconfiguration.
The forms of governance suitable to the different classes
of the logistics services are suggested. In particular,
hierarchy and internal market should be adopted when the
firms decide to internalize the logistics services. The
adoption of the pure market seems appropriate for the
logistics services characterized by a low level of the
market complexity. The adoption of the network with 3PL
seems proper for the logistics services classified as
bottleneck and strategic. Finally, the organized market is
appears to be suitable for the complex and consolidated
logistics services.
Further research will be devoted to test these propositions.
In particular, mechanisms to implement the organized
market of the logistics services will be investigated, by
paying attention to the kind of relationships and the
coordination mechanisms among the actors at the different
SC interfaces.
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